What should the government be spending its money on? So in those countries, social services are making up ~25 percent of government spending. But that includes healthcare and jobs programs, which are services that should directly bolster the larger economy by creating a healthy and more mobile workforce.

Meanwhile the US government spends about 35% of our GDP in a good year [1], and it is well known that over half of that goes to social security, medicare, and a smaller amount to housing. [2]

My only point is that it is easy to see that graph you posted and think that things are out of control, but the reality is just that in a post-war, urbanized, liberal society the governments job is to serve the people and sometimes that means spending money on them. I know surely none of us here will ever take adventage of medicare or social security in our old age. We will not be hiring students who went to state-funded schools (ew) or who live in subsidized housing--if they are that poor they can't work for me! But normal pepole actually do sometimes get help from the government and it is fine.

[1] https://tradingeconomics.com/united-states/government-spendi... [2] https://www.nationalpriorities.org/budget-basics/federal-bud...

Government spending as a share of GDP is increasing. The main issue is this, not what the government is spending on.

Increasingly taxing people to subsidize other people, through large government bureaucracies with a monopoly on those tax dollars, leads to slower economic growth. Picketty is ignoring the elephant in the room when trying to identity the cause of European economic sluggishness.

And if you want people's quality of life to improve, reduce their tax burdens and lift regulatory restrictions on their business activities, so that they can serve consumers more effectively by investing more of their time and money creating firms that cater to them.

Heavily tax speculation and heavily reduce taxes on productive activities.

> Heavily tax speculation

Like startups?

Like most financial engineering. Put a tax on every transaction

This reduces economic coordination, which makes the economy less productive.

Reduces economic coordination? Do you mean collusion? Price-fixing?

Yes, there are advantages and disadvantages to financial transaction taxes. I like them because they are progressive and reduce the profitability of share flipping. In theory, they would also reduce high-frequency trading, which seems like it's casino adjacent.

Transactions are not needed for collusion or price-fixing. Those happen through regular communication channels. Economic coordination happens through price signals and commercial exchange. The more friction is attached to commercial exchange, the less people trade, and the fewer opportunities to coordinate for the benefit of all involved parties can be exploited.

In other words, taxing transactions reduces division of labor, which is one of the main sources of productivity:

https://en.wikipedia.org/wiki/Division_of_labour

Are startups not "productive activities"? I said to REDUCE taxes on productive activities which in my definition includes Startups.

Perhaps my definitions of "speculation" and "productive activities" go against conventions?

Speculation is productive. All investment is a form of speculation about the future.

Even speculation in the secondary market is productive. It supports the valuation of securities, which allows companies to raise more capital on issuances of new societies, which in turn provides firms with funding for the formation of productive assets.

My bad. I wasn't clear on how I define "speculation". When i use the term "speculation" i refer to things like buying up assets such as housing to extract more wealth from those assets or even to help drive the price up of said asset.

However, buying shares in a startup can be interpreted as "speculation" but I would see it as a good thing, so my choice of terms was not the best.

I dont see Blackrock or Blackstone buying up houses as a good thing. I see that as "speculation". But I realize now my definition of the term is much different from most other people.

I know it seems counter-intuitive, but investors buying up scarce resources like housing, and pushing up their price, is what you want to happen. When the price rises to reflect the scarcity of the product, then the profit motive to produce more of that product increases. That means more houses get built. A high price has a real purpose in the economy, so we should let investors buy up the assets they want so that the price of assets aligns with their respective scarcitym

Now Single Family Houses are a slightly different thing, as much of their value derives from the land that they're built on, and you can't build more land. So the benefit of investors buying up SFHs is going to be much less significant than investors buying up units in high-density developments like condo towers.

> spending _its_ money

They're spending everyone's money. How about we don't enslave people to their government and simply leave us all to spend our own money and resources how we see fit. Don't give me any nonsense about the social contract or democracy. The government has grown beyond any reasonable remit it was granted and is enriching itself or investing in failed programs.

Where do you think that money comes from and what gives it value? Your bank account is full of your governments' money...

> what gives it value?

scarcity, for most people it's a representation of their labor valued on a market which in a fundamental way represents the energy they express

insofar as government whips it up out of thin air, they're stealing from everyone that's accumulated money in any degree and debasing their wages

I’m not sure this is necessarily showing a trend of expansive government. It seems to correlate well with the aging of societies.

To be clear, when I write not sure I mean not sure, not “no”.

The share of GDP that is constituted by government spending, let alone the inflation-adjusted volume of government spending, has risen far faster than the proportion of the population that is elderly.

Why would additional spending cause sluggish economies? By definition added spending increases economic activity. You can debate the secondary effects of it but spending to gdp is more or less a direct line.

The populations are getting older, health costs will tick up, so you can expect to increase those costs. But immigration is discouraged so you have to keep your workforce healthy

Isn’t the idea that the money and resources have to come from somewhere?

Raise taxes or debt for the monetary side. Divert workers and other resources on the implementation side. Both of those might be better used by the private sector

When a Western government (or other state actor) decides to build something — public housing or satellites or a packet-switched network, for example — they don’t actually build it themselves. Governments don’t own construction companies and electronic design companies and research labs. The money goes to private actors who do the work.

So “divert” seems misleading. If the American government hadn’t “diverted” funds to build ARPANET half a century ago, we’d probably be stuck with the equivalents of AOL-style walled gardens instead of a single Internet because that’s the kind of network that private interests wanted to have.

... and this is called the "broken window fallacy".

You're right in that you remark that it's less bad than it initially seems. Some wealth is indeed recovered when the broken window is repaired. However everyone is by necessity worse off than if you didn't break the window in the first place.

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

It is not additional spending. It is the share of total spending controlled by government growing at the expense of share of spending being controlled by market actors like consumers and private firms.

This leads to less effective allocation of capital, because large monopolistic government bureaucracies don't have the structure or incentive to perform anywhere near as efficiently as market actors.

I think there is data that says the opposite (particularly in the context of Piketty), there is a reduction of efficiency when too much is controlled by overly concentrated capital structures.

The data all shows that higher government spending is correlated with lower rates of economic growth.

This study both provides data and provides a number of citations to other studies which provide data on this correlation:

https://web.archive.org/web/20170821004405/http://ime.bg/upl...

If you believe that the best possible allocation of funds is through government spending as opposed to capitalism, yes. That's an exercise in begging the question, though, and historical support for the premise is uneven at best.

Maybe my brain has been too rotted by listening to Noam Chomsky in my youth, but government spending and capitalism are two sides of the same coin. Everyone in washington is a capitalist, maybe withstanding 1-2 representatives. Large corps are constantly communicating with our leaders, far more frequently than their private constituents. To think that there is some secret, powerful office of the government where they are trying to dismantle capitalism through the use of welfare is a bogeyman. Welfare is there to prop up the ideology of capitalism as it smears against the rough road of reality.

Capitalism is primarily concerned with production, not welfare. Its central dogma is that society's welfare is naturally maximized along with its productive capacity, but there is essentially zero acceptance of that point of view anywhere on Earth, certainly among those in power.

Arguably the optimal operating point for an economic system, from a GDP point of view, is to maintain just enough public spending to keep a Robespierre from arising from the unwashed masses. Public spending beyond that is an unproductive waste.

Most of us would agree that sacrificing everything else on the altar of GDP is not what we want to do, though, so the (perfectly legitimate) question of where the compromises need to be made is always going to be on the table.

> Everyone in washington is a capitalist

in the sense that Nancy Pelosi and others are enriching themselves through insider trading, I guess